Everything you need to know about regional provider consolidation

The consolidation of the provider market has been counting on increasingly demanding financial players, as well as a growing volume of merger talks between ISPs of various sizes. According to the consultancy Advisia, 20 to 25 providers are already emerging as candidates for “consolidators” in the market. Very present topic at the national meeting of Abrent 2019.

It's not a matter of size, but of profile. Consolidators are expansionist and/or acquisitionist companies. They are very attractive for funds, and some already have them in the share capital or with 100% of the capital held. There is a lot of real M&A activity and practically all 20 or 25 consolidators are being approached with great intensity by financial agents, from advisors to funds”, analyzed the partner of Advisia Investimentos, Rodrigo Leite.

“Regional, local and small companies, on the other hand, have been prospecting and thinking about agglutinations all the time. The locals mostly.” Therefore, we can characterize the ISPs in four distinct groups, presented in the table below. All together, they would add up to around 13.4 million fixed broadband accesses, 6.6 million of which are still underreported to Anatel. Regional providers hold 35% of the Brazilian Internet market and still have a lot of space. 

How is the consolidation of regional providers current?

Despite the prognosis, the current consolidation scenario is very different from what it saw a few years ago, argued Triple Play CEO Gilbert Minionis. Managed by Grupo Acon Investments, the company has 6 ISPs acquired since 2016. With the credential of operator and fund representative, Minionis stated that “in the past three years, everything has changed” on the horizon of mergers and acquisitions. “We had a lot of organization, with each provider thinking about whether to monetize the effort of so many years of work. Today there is more supply for investors than four years ago, when they wanted to buy and there was no option. Which makes them more demanding”, he argued.

“The biggest consolidator in the provider market is the provider itself, which is doing or thinking about doing business within the sector”. Both large and family funds “sit down with several operations, did a lot of due diligence, but few operations took place”. The situation would have “shaken and woken up” several companies in the segment. They began to put the house in order, also seeking to unite with competitors.

A recent agglutination in the sector was led by the Vinci fund, which brought together eight mining providers under the Vero brand – in a process that had the help of Advisia. Rodrigo Leite, however, notes that many operational and tax steps need to be taken by those interested in mergers before the decision is made. “A lot of people are talking about joining three, five, eight companies, but it's not that easy”, he warned.

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